Employee vs Independent Contractor
In British Columbia, there are laws that protect employees and provide them with certain entitlements. For example, employers must provide their employees with minimum wage, safe working conditions, vacation pay and time off and severance upon termination (both statutory and common law). Employers may have to financially compensate their employees if they do not comply with these laws.
In turn, employees owe certain duties to their employers like loyalty, honesty and performing their job to the expected standard. Failure to fulfil these duties may provide an employer with grounds to terminate their employment for just cause (i.e. without any severance).
Both employers and employees also participate and benefit from government programs such as Employment Insurance, Canada Pension Plan and workers compensation.
Many of these laws do not apply to independent contractors. Therefore, it’s important for both workers and businesses to understand whether a worker is an employee or a contractor.
How to tell the difference?
A common mistake in workplaces is incorrectly assuming a worker is a contractor because their contract says so.
Courts and tribunals decide whether a worker is an employee or contractor by looking at how the worker and business behave. There are several questions courts and tribunals will ask when making this decision. Some of the most common questions include:
Who controls the work (for example: how the work will be done, ability to sub-contract hours, etc.)?
Who owns and provides the tools and equipment?
Does the worker share the risk of profits or loss depending on whether the business succeeds?
Is this the worker’s only job or can they work for other employers?
The more a worker is seen to be running their own business – or in other words, carrying on an enterprise – the greater chance they will be a contractor.
Dependent Contractors
Courts and tribunals recognize that there is a sliding scale of working relationships with an employee on one side and a true independent contractor on the other. In the middle, there is a third category of dependent contractors who have certain employee-like rights – most notably entitlement to common law severance upon termination.